Best Shorting Opportunity of 2010 Says Technical Strategist Robin Griffiths

Today we're presenting commentary from Cazenove Capital's technical strategist Robin Griffiths. In an interview on CNBC a few weeks ago he said that we are approaching the best shorting opportunity of 2010. Given that last week we covered the bullish case for equities, we wanted to present the other side of the coin.

Technically speaking, Griffiths feels that April 2010 marked the "top" of the year-long rally that began in March 2009. As such, he is cautious, simply stating "do not put risk on." Ever since this top, the market has been in a downtrend and he feels the only way he would switch his stance is if the market blasts through the April 2010 high. He also points out that the next four months are typically the weakest of any in a year. He doesn't think that the market will break through its early August highs either (around current levels at 1125 on the S&P 500).

He feels the market will break the July low and can see a 10-15% fall. Specifically, he is targeting 940 on the S&P 500. If you were looking to trade around his comments, it would seem that shorting and placing a stop at the April 2010 high would mirror his take. Now, do keep in mind that it has been two weeks since he made this commentary. However, his stance is still relevant given that the market is sitting at levels that still sit within his parameters. It appears as though to the two main levels to watch on the S&P 500 are 1020 for possible support (July low) and 1220 for resistance (April high).

Embedded below is the video of Robin Griffiths' commentary at CNBC. Email readers will need to come to the site to watch the clip:



So, a bearish argument based on technical levels of support and resistance. For a completely converse look, last week we presented the bullish case for equities.

Is It Time To Buy Gold?

MarketClub recently took a technical look at gold and given that everyone is talking about the metal, we wanted to highlight their analysis. Pulling up a chart of the precious metal, Adam points out a potential double top at around 1,264 that took place in June. Since then, gold has sold off in a substantial manner, down to 1,179. He then pulls up the fibonacci retracement tool to identify very important levels in gold. Both the 50% retracement and the 61.8% retracement levels are important in the metal and here's why: both reside around previous support levels of 1,157 and 1,132. While gold could still possibly fall below these levels, he looks for those two areas to provide price support.

In their technical analysis video of gold, MarketClub also points out a previous bearish divergence in the MACD as it turned negative while gold still headed higher in May and early June. That divergence provided an early signal as gold began to decline in late June. Adam thinks a divergence to the upside is about to take place and an entry point into a gold long should be coming. Keep in mind, though, that he still feels gold will trade down/sideways in the very near-term. The buy level he is looking for is between 1,132 and 1,157, which implies some further downside. Those levels, coupled with confirming indicators, could provide an excellent entry he feels. Click the video below to watch his analysis on gold:

Free Two Week Trial to MarketClub

MarketClub has graciously offered Market Folly readers a free two week trial. If you're unfamiliar with them, they provide an entire platform of trading tools including their well-known and proven trade triangle technology that signals entry and exit points on stocks, indexes, commodities and more. MarketClub provides you with technical analysis, chart pattern recognition, scans for trends, and an online trade school for those of you looking to learn the ropes or refine your skills.

If you've been a reader of the site, you know that we occasionally highlight relevant charts and patterns that their team is seeing. This free trial provides you with unlimited access to their technical analysis. While fundamentals drive the majority of investment decisions for most of our readers, charts and technical analysis are just another set of tools to add to your investment arsenal. Their tools just help you take a step back and examine the big picture of the markets and specific stocks to better understand what the big money movers are seeing and acting on.

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Stock Market Technicals: Bearish Engulfing Pattern Is Cause For Concern

It's been a while since we last took a look at the market's technical picture so today we're highlighting MarketClub's latest market analysis video. In it, they highlight a signal that has typically preceded strong market declines. They're currently cautious on the stock market and derive this stance from two signals: a bearish candlestick pattern that just emerged as well as a strong level of support that's about to be broken. You can see their latest analysis in the video.

Let's first focus on the negative candlestick pattern they've identified. MarketClub pulls up a weekly chart of the Nasdaq and notes a negative/bearish engulfing line, a pattern whereby the previous bar is completely eclipsed to the downside. This marks a temporary top around the 2,350 level in the Nasdaq. This is important because they point out this same pattern signaled a sell-off in early May. If that's not enough to elicit concern, they point out another previous time where this pattern preceded a decline. Back on October 15th, 2007, a bearish engulfing line marked the beginning of what would be a massive downtrend during the financial crisis.

Turning next to support levels, MarketClub identifies 2,200 on the Nasdaq as a key place to keep an eye on. If it closes below that on a weekly level, the market is most likely headed lower. Throughout May and June, this level has been tested to the downside numerous times and looks like it is on the verge of breaking. Lastly, they highlight that their proprietary trade triangle indicators are signaling a negative trend, thus suggesting a cautionary stance on the markets. You can view their stock market technical analysis by clicking the video below:

Battle of Bulls & Bears: Key Stock Market Levels

Adam over at MarketClub recently took a look at the S&P 500 from a technical analysis perspective and has concluded that we'll continue to see choppy market action for a while. In his latest market analysis, he points out a series of lower highs, typically a sign that favors the bears. Basically, he argues that the key level to watch in the market is S&P 1,100. If the market rallies above that level, it has a strong chance of resuming the longer term uptrend we've seen over the past year or so. However, if the market continues to stall at 1,100 (as it has previously), then the bears are in control. This level becomes even more interesting when you consider it's currently right around where the market is trading and this could be a potentially pivotal point.

Additionally, he points out 1,040 as a second key level to watch in the S&P 500. This level could potentially be a double bottom as the market tested that level in late May and then again in early June. He notes that we'll get confirmation of this double-bottom (a bullish pattern) if the market rallies above that 1,100 level. So, all said and done, 1,100 is the key level to watch on the upside as it seems to hold all the technical keys. Overall though, Adam concludes that it will continue to be rough waters throughout the summer, typically a time of lighter volume as many traders/investors are on vacation. Click below to watch the latest analysis of the S&P 500:

Technical Analysis Weekly Watchlist

OptionAddict is out with the latest edition of his weekly watchlist. In it, he provides some technical analysis and trading setups for those of you looking to play the increased swings in the market over the short-term.

Embedded below is the video of his weekly watchlist:



And then MarketClub also recently outlined a key level to watch in the stock market as well.

Key Level to Watch in the Stock Market

Adam over at MarketClub just recently put out his latest technical analysis video on the Dow Jones. In it, he identifies a key level to watch in the market as we've started to see a few distribution days. While he is by no means saying the market will crater from here, he is definitely cautious. Drawing a fibonacci retracement from the highs in 2008 to the lows in 2009, he starts to outline a clear area to watch out for. The Dow Jones recently traded around 11,254, right at the 61.8% retracement level, an area Adam feels the market is bound to find as resistance. Thus far, the market has failed at that level and declined to the present 11,000 region. You can hear his latest analysis in the video below:



Simply put, he feels it's time to protect some capital by reducing some long exposure as there's nothing wrong with taking some profits. Head to MarketClub's latest look at the stock market to hear his thoughts.

This technical look coincides with a few other heedful stances as we noted hedge funds were selling equities and market strategist Jeff Saut recommended caution. Not to mention, we also saw legendary investor and former manager of the Quantum Fund Jim Rogers start some short positions and we also started to see emotional reactions often found in the investor psychology cycle as the market booms from peak to trough and back again. Overall, it seems many are becoming more cautious on the stock market in the near-term and the technicals seem to agree according to Adam.

Technical Analysis of Apple (AAPL): Price Target & Key Levels

Given that Apple (AAPL) just reported blowout earnings, Adam over at MarketClub wanted to take a look at the stock and sent out a technical analysis video on AAPL. In it, he pulls up the monthly candlestick chart and identifies $80 and $200 as key levels. From 2008 until early 2010, Apple traded in this range as it sold off hard throughout the crisis but then rebounded stronger. He says this area has created an 'energy field' as the stock consolidated (but that's quite a wide consolidation if you ask us).

The reason he outlines those two levels is to establish a price target. Subtracting the $80 level from the more recent $200 level, you get a 120 point move. Tacking that on top of the $200 level, he feels that a logical price target for Apple is $320 (200 + the 120 point consolidation). On a fundamental basis, this price target could be reasonable (after all, the company is firing on all cylinders.) However, we're not quite sure the technicals set up for such a move as you have to realize Apple has essentially run straight up from $80 to $258 with only one major pause. You can view Adam's video on Apple here.

We think the most notable bit of information to takeaway regarding AAPL's technicals is the $215-220 area. This level was previously an area of resistance and Apple has since blasted through it. Look for that level to serve as support going forward. In an ideal situation, this would be a great place to enter AAPL shares long if you ever see a pullback. Adam doesn't think shares will trade below that level and we'd concur. There's no denying Apple is a monster of a company right now. Not to mention, tons of hedge funds we track hold AAPL as one of their top positions. And you can bet they're not long for the technicals; they're in it for the fundamentals. Click below to watch the technical analysis video on Apple:

Crude Oil & Gold Trading Ranges: Key Levels to Watch

MarketClub recently analyzed two of everyone's most favorite commodities: crude oil and gold. Adam just took a technical look at crude oil and wondered if it has topped out for the year. He draws a fibonacci retracement from the peak during oil's epic rise down to the trough and notes that the commodity is currently trading right around the 38.2% retracement level. In his oil video, Adam concludes that it is currently stuck in a trading range and could be for some time. But he does note that after trading ranges often come explosive moves. He highlights that the $72 level as an absolutely key level for support. If crude oil breaks that level to the downside, then he thinks it sets new lows for the year. One thing their analysis does not take into consideration, however, are the seasonal factors at play with crude. Typically, summer months command higher prices in oil so we'll have to see what happens there. Click below to watch Adam's video:



MarketClub also cranked out a technical analysis video on gold where they wonder whether or not gold is setting up for its next big move. Obviously, the longer term trend has been up and they illustrate how the metal continues to make a large move higher and then consolidate and trade sideways for a while to digest the move. It has repeated this pattern on a large scale numerous times over the past few years as you can see in their gold video. So, similar to crude oil, Adam feels there's really no trend right now and it will continue to trade sideways. He outlines $1,165 as the key level for the metal as it won't be able to start any move higher until it breaches that level to the upside. You can check out their technical look at gold below:

Key Technical Levels to Watch in the Markets

Adam over at MarketClub is out with his latest technical analysis video on the stock market. In it, he takes a look at the extended market as this rally just continues to march on and take no prisoners. He immediately points out that the Dow Jones is trading around 11,144 and that the 61.8% fibonacci retracement is just up ahead at 11,241 and could potentially be a source of resistance for the market.

Looking at the S&P 500, the fibonacci retracement situation is nearly identical as the market is trading around 1,211 and the retracement sits just ahead at 1,226. Adam points out that this will be a very key area to watch. By no means is he recommending you short this market just yet as that's essentially a deathwish. Everyone that has tried that thus far has burned. However, it's always helpful to be cognizant of key levels to watch in the markets. Click the chart below to watch the video:



Those above fibonacci levels are something to keep an eye on and you should really only consider putting out shorts once the market starts showing signs of weakness first. In the mean time, it never hurts to lock in some profits, trim some positions, and raise cash levels. While hedge funds will almost always have short positions on, you have to remember that they've been burned by the majority of those positions as of late. This technical analysis is obviously more from a market timing perspective and you can view MarketClub's latest video analysis here.

MarketClub Free Trial for 2 Weeks

Occasionally, we'll post up insightful technical analysis from the guys over at MarketClub. They've just informed us that they're giving away their premium content for free for a bit, so we thought we would share. So, here's a free 2 week trial to MarketClub for those interested.

Through the freebies you'll have access to their trade school, chart analysis, smart scan and data center. It's a great way to refine your technical analysis skills for those interested. Take advantage of the free trial as we're not sure how long it will last.

Gold: Rangebound Before Its Next Big Move?

Adam from MarketClub recently penned an in-depth article with his thoughts on gold. He also put out an accompanying video analysis of gold so you can follow along there. Basically, before gold makes its next large move (in either direction), he argues it needs to consolidate and form an 'energy field.' Click the graphic for his video and then the rest of his thoughts follow below:



MarketClub: "Gold has had some dramatic moves in the last eighteen months and we expect it will have some equally dramatic moves in the future, but not right now. While I recognize that gold is one of the few commodity markets that people are really passionate about, the purpose of this article is not to take sides either with the gold bugs or those who reject the argument that gold is forever. Rather, I want to discuss my interpretation of the markets cycle.

After spot gold made an all-time high against the dollar on December 2 at $1,226.37, gold has been in retreat mode. For the for the past several months gold has been in a broad trading range, seemingly unable to move one way or another. This process has created frustration from bulls and bears alike. Here is the dirty little secret about the gold market... it can be a horrible investment and here's why: Gold first started trading in the 80's while I was on the floor of the Chicago Mercantile Exchange in Chicago as a member of the International Monetary Market, (IMM) which was at that time a division of the CME (now the CME Group). When gold opened up the public clamored to buy into the gold futures market and guess who sold it to them? That's right it was the pros- the guys who made their living trading. As a result, gold hit an all-time high of around $850 an ounce back then and it took almost 25 years for gold to move over that level, at least in dollar terms. I don't know what your timeline is, but 25 to 30 years is an awful long time to get even again.

So what is really happening in this market? Everyone is aware of the problems in Europe with Greece, Portugal and a host of yet to be named countries. We all know that the huge amount of money being printed, coupled with the bank failures abroad contribute to the dollars declining value. These events, in conjunction with the American governments actions, also contribute to the devaluation of the dollar. The government claims that this is beneficial to exports, but the bottom line is that the purchasing power of the American dollar continues to erode in world markets.

Based on the declining value of world currency against gold you might ask- why isn't gold trading at $2,000 or even $3,000 an ounce? What is wrong with this market? This is because a great deal of what goes into the gold market is psychological and reacts to cyclic trends driven by both psychological and economic factors. Here is what I've been able to observe in the last several years in gold and seems to be holding true. It is something that you should pay attention to if you're interested in the next big move in the gold market.

Before gold can move higher it needs to create what I call an "energy field". The most recent energy fields in gold were between May 12, 2006 and September 20, 2007. This 17 month energy field saw gold prices oscillate between a broad trading range bound by $730.08 (upside) and $541.80 (downside). That energy field produced enough power to propel gold to the new high of $1,012.40 on March 17, 2008. This marked the first time gold exceeded, in dollar terms, the highs set in the early 80's mentioned earlier. The energy fields I have observed for gold are taking somewhere between 17 and 18 months to complete. If the energy field holds, then the December 3rd 2009 high of $1,226.37 should remain in place for quite some time. If the same cycle remains true then the recent lows that we witnessed, at $1,050, should also remain intact as they represent the 15 to 16 month cycle low.

With the lows in place the next question becomes when is the next cyclical high in gold? Based on the existing cycle, we can expect the next major gold high in 2011. To summarize: I expect gold to be locked in a broad trading range for the next 12 months bounded by the December 09 highs of 1,226.37 and the lows of $1,050.00. If the gold cycle holds true, we expect that gold tops the $1,226.37 marker by April or May of 2011. On the upside we will also be looking for gold to make a nature cyclic high in October or November of 2011. It's impossible to predict the future with any degree of accuracy; however when we look at the cycles in gold this reads as a pretty good bet. No matter what happens we expect gold will offer some great trading opportunities that investors and traders should be able to take advantage of." You can view the rest of Adam's thoughts in his video on gold here.

While this covers the technical look at gold, keep in mind that we've posted various fundamental research on gold as well, including:

- Societe Generale's research: gold as an insurance policy (& when to sell it)
- An in-depth look at John Paulson's new gold fund
- The dynamic between gold, the dollar & gold equities
- Global macro hedge fund Woodbine Capital's thoughts on gold
- John Burbank & hedge fund Passport Capital's rationale for owning physical gold

Technical Look at Nike (NKE) & the US Dollar

Adam over at Marketclub recently put out a technical analysis video on Nike (NKE) and he notes an interesting pattern. NKE recently broke out of a trading range and 'energy field' as he calls it. Nike consolidated in early 2009 and formed almost a reverse head and shoulders that helped propel it to new highs recently. Adam points out that the stock should technically have a price target of $90 now based on its move. With Nike currently trading in the mid $70's, that's some impressive upside.

In the video, he thinks shares have compelling risk reward currently as he outlines $72 as a nice level for your stops. If it falls below that level, exit and look for a better opportunity. We'd actually go a step further and put stops right below the gap at $70 as gaps often seem to fill on charts. So, it would make sense for NKE to consolidate back down to that level before resuming its trend higher. You can watch the video here.

Next, Adam examined the US Dollar index and wondered if it is going higher. In his US dollar video analysis, he notes that the dollar has been heading higher overall since 2010 began. He also draws out the pattern of a stair-stepping move where the dollar is exuding cyclical action. Applying that pattern to current dollar trading action, Adam hypothesizes that the dollar has an $83.90 target price, implying further upside to come. He notes that all of his signals are currently bullish (MACD, trade triangles, trend, etc) and to look for the dollar index to hit that price target relatively soon. You can watch the video by clicking the chart below:

Technical Analysis Round-Up: Gold, S&P 500 & the US Dollar

We just wanted to take a second to highlight some interesting charts and technical analysis videos we've come across lately so let's dive right in and appropriately start with the stock market in general. The market has been uptrending pretty ferociously over the past month or so and many are calling for a near-term pullback. The MarketClub team has put out a technical analysis video on the S&P 500 and they note that the recent rally has been on low volume. Not to mention, they highlight that the market has been hovering around resistance as of late. All signs seem to point to a pullback in the near-term as the rally is due for a healthy breather. Click below to watch the S&P 500 analysis:



We'll turn next to everyone's favorite precious metal. They have also released a video on gold and we took note because gold seems to have put in a bearish engulfing pattern which is typically negative. They highlight that the big level to watch in gold is $1,091. If that level is taken out to the downside then gold could potentially trade down to $1,060 or so. Overall though, they think gold is in a trading range for the near-term. We keep checking in on gold because tons of hedge funds have exposure to it, whether it be a macro bet, a hedge, or for some other purpose in their portfolios. John Paulson has even launched a gold fund for his bet against the US dollar. Click below to see MarketClub's thoughts on the much talked about metal:



Also, given that we just mentioned that John Paulson is betting against the US dollar via his new gold fund, we figured it'd be a good time to see what the dollar looks like these days. Marketclub also has a technical analysis video on the US dollar and they wonder whether it is reversing again or not. They pull up a EUR:USD chart and note that there are two important levels on the chart, the recent highs in December of 2009 and the big lows in March of 2009. After outlining fibonacci retracements, they determine that it has bounced off a level of support and it technically looks like it wants to head higher. Click below to hear their thoughts on the USD:



Lastly, here's the latest weekly watchlist from the OptionAddict. His video details technical analysis trade setups for those looking for near-term opportunities, primarily of the swing trade variety. He takes a look at various chart patterns, trends, and highlights them all in the embedded video below:




Then you can also watch MarketClub's video on gold here and their analysis of the S&P500 here. As always, plenty of charts to keep your eye on within these ever-changing markets.

Key Technical Levels in the Markets

Adam over at MarketClub has put out a quick video on technical levels in the markets. Basically, he points out that there's no denying we're still in an uptrend. But at the same time, it never hurts to have an exit strategy and back-up plan in place should the markets turn sour. After all, stop-losses are one of the most useful tools in financial markets. Here's the video:



He highlights key levels in the major markets and draws the line in the sand as follows:

Dow: 9,835
S&P 500: 1,044
Nasdaq: 2,100

So, all you have to do is keep an eye out for those levels which mark the most recent lows in the market. It's not rocket science, it's simply monitoring the trend. Until those levels are taken out to the downside, the trend remains up.

Technical Analysis Weekly Watchlist

For those of you looking for some shorter term trade ideas, we present you OptionAddict's weekly watchlist of technical analysis setups. Below is the video presenting chart patterns, buys, sells, and more:

Checking In On Gold

We wanted to highlight MarketClub's recent video on gold given that we've been keeping an eye on the precious metal. After all, tons of prominent hedge funds have assembled large stakes in gold and we'll highlight all the resources we've posted at the bottom of the article. But taking a quick technical look at the metal, they are seeing two major conflicting patterns and will ultimately need a resolution. Click below to watch the video:



In their video, they draw a trendline from November of last year to present action and you'll see that gold recently bounced off the bottom of that support. At the same time, there has been a downtrend over the past few months that has caused a stir amongst gold bugs. The main thing to watch for is a break in either direction of the triangular pattern that has taken shape. MarketClub thinks that gold will be trapped in a trading range for a little while before ultimately heading one direction. The simple thing to do in the mean time would be to get long on a break to the upside of the pattern, and exit longs/get short on a break to the downside. But for now, the longer term trend is still up. Check out their thoughts on gold.


Next, shifting more towards a fundamental view, we have covered a plethora of in-depth resources regarding the investment case for gold. Below is a list of hedge fund research we've assembled and highly recommend for those of you puzzled by the precious metal:

- An in-depth look at John Paulson's gold fund & bet against the US dollar (Paulson additionally owns a ton of exchange traded fund GLD as a hedge to his fund share class denominated in gold).

- Global macro hedge fund Woodbine Capital has taken a different stance on the precious metal and penned their research in Gold: The Anti-Goldilocks.

- John Burbank & Passport Capital's rationale for owning physical gold versus other proxies.

- David Einhorn is also storing physical gold (hedge fundGreenlight Capital).

- Sprott Asset Management (Eric Sprott) launched a physical gold trust and also published research entitled, The Ultimate Triple-A Asset


Meanwhile, you have legendary investor George Soros recently out saying that gold is the ultimate bubble. As you can see, there are quite a few prominent players interested in the metal, so at the very least it's worth monitoring the situation.

Market of 2010 = Market of 1929? Historical Comparison

Adam and MarketClub just posted up an interesting analytical video where they look at whether or not this is deja vu all over again for the stock market with historical comparisons to 1929. They examine the current 2010 market and outline the similarities to past markets. History often repeats itself, especially in market patterns. Adam notes that this chart is not meant to scare people, but rather to keep in the back of your mind as a possibility given the ferocious nature of bear markets and their massive gyrations. After all, people often become complacent when everything is fine and dandy and stocks are heading higher. The red underline in the chart below highlights the part of the historical pattern that the 2010 market has already completed. As you can see, the 1929 market fell drastically lower after completing that pattern. Click below to watch their analytical video:



They highlight that investors are nervous, especially the babyboomers who are worried about their retirement funds. If the market starts to drop dramatically again, you can bet there will be a stampede to the exits of investors wanting to preserve what they have left. Just like the market of back in the 1930's, this market has seen a massive sell-off and a strong reflexive rebound. The same pattern occurred back then and was followed by a massive leg down. Now, obviously we're not in the Great Depression, but we've certainly been in the great recession. While the severity of that 1929-1933 bear market might not be replicated, there are still chances we could see the massive swings so often associated with bear markets.

Again, this is only to highlight possible historical similarities and is not meant to be some harbinger of doom. In the markets, it always pays to be nimble and to avoid complacency. Keep your eye on the fibonacci retracements and the overarching technical pattern of the stock market for clues as we go forward. As they always say, the trend is your friend.

Technical Analysis Weekly Watchlist

We haven't posted the OptionAddict's technical analysis weekly watchlist of stocks and charts to watch for some near-term swing trading setups in a while, so here's the latest edition.

Embedded below is the video:



Past technical analysis posts include the Nasdaq breaking a major trend line and how you can watch Apple (AAPL) and the market generals for tells.

Apple (AAPL): Are The Market Generals Falling?

That's the question on a lot of people's minds as the market has sold off and some of the market leaders have been hit hard. The guys at MarketClub take a look at the technical picture in their recent video on Apple (AAPL). While it's one thing to look at the stock market as a whole, many like to watch the market leaders for the next clue. Apple has undoubtedly been one of the market leaders, having skied from $80 to north of $200 per share.

However, Apple has started to sell-off recently amidst the announcement of its new iPad media device. Apple is aiming to revolutionize the book/media space with the iPad & iBookstore like they did music with the iPod and iTunes. The fact that shares of AAPL sold-off is not really a big surprise though, given that it has almost always been a "buy the rumor, sell the news" kind of stock. Not to mention, it's had a monstrous run. Lastly, practically everyone already owned it, as it was the sixth most popular holdings amongst hedge funds.

The chart is starting to show some definite weakness and they outline $185 as a key level in AAPL. If it breaks down below that, things could get ugly:



Check out their technical analysis on AAPL for a possible 'tell' from the market generals. It doesn't look good right now because as we mentioned on Friday, the Nasdaq broke a major trend line too.